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Business Dynamics Statistics

Tracking Annual Changes in Employment for Growing and Shrinking Businesses

There are more than 6 million establishments with paid employees in the United States. These businesses are dynamic: opening and closing, adding and losing employees.

Funded by the Kauffman Foundation, in collaboration with the U.S. Census Bureau's Center for Economic Studies, the Business Dynamics Statistics is a data series that allows users to track the annual changes in employment for growing and shrinking businesses at the establishment level.

The BDS monitors this activity, tracking annual job creation and destruction at the establishment level using elements not found in similar databases, such as firm age and size. Tracking by firm age, for example, allows users to distinguish between new establishments of new firms and new establishments of mature firms. These statistics are crucial to understanding current and historical entrepreneurial activity in the U.S.

A number of key economic data items are tabulated by the Business Dynamics Statistics, including number of establishments, establishment openings and closings, employment, job creation and destruction, and job expansions and contractions. The information is compiled from a database of establishments and firms tracked over time known as the Longitudinal Business Database.

Analysts and policymakers need to understand business activity and the process of job creation to enable informed decision making. One novel feature of the BDS is that the activity of young entrepreneurial businesses can be comprehensively tracked by industry, state and over time.

The Business Dynamics Statistics provide annual statistics from 1976 to 2005 by firm age and size. Annual files are also provided at the state level for Standard Industrial Classification sectors and for the economy as a whole.

Findings from the Business Dynamics Statistics include:

States differ substantially in the creation and establishment of new businesses. States with higher entrepreneurial activity are in the West and Southwest, with as much as 12 percent of employment accounted for by young firms (less than 3 years old). In contrast, states with low entrepreneurial activity are in the East and Midwest, and have about 6 percent of employment accounted for by young firms.

Establishments owned by younger firms grow faster, on average, than those owned by older firms. However, many young firms close shortly after they open, so the job destruction rate is also higher for establishments owned by younger firms. Hence, BDS shows the pattern for young businesses is one of "up or out," with rapid net growth for survivors balanced by a high exit rate.

The BDS shows that the fraction of employment accounted for by business startups in the U.S. private sector over the 1980-2005 period is about 3 percent per year. This exceeds the 1.8 percent average annual net employment growth. This pattern implies that job destruction exceeds job creation at existing businesses and highlights the importance of business startups for job creation in the U.S. economy.

Reports using data from the Business Dynamics Statistics:

07/15/13While the rebound in job creation emerging from the Great Recession is encouraging, its rate of recovery lags well behind the pace of other recent recessions. In a paper using BDS 2011 data, "Anemic Job Creation and Growth in the Aftermath of the Great Recession: Are Home Prices to Blame?", researchers at the University of Maryland and Census Bureau explore the relation between the decline in housing prices at the heart of this recession and job creation at young firms.

06/29/12Building on a long-term trend, the nation's business startup rate fell below 8 percent for the first time in 2010, marking the lowest point on record for new firm births. New firms as a percentage of all firms continued a steady downward trend in 2010 – going from a high of 13 percent (as a percentage of all firms) in the 1980s to just under 11 percent in 2006 before making a steep decline to the 8 percent in 2010 – the most current year of data available.

06/14/08While the current economic turmoil arouses anxiety and concern over job losses and business failures, this research shows that the "churning" of jobs and businesses also sows the seeds for future growth and productivity gains. New firms play a vital role in the process that links churning to productivity gains.

03/20/11The Census Bureau's Business Dynamics Statistics provides data on business dynamics for U.S. firms and establishments with paid employees. This briefing highlights some key features of the most recent BDS update, which now has data through 2009—the trough of the recent recession.

01/14/09Newly released data from the U.S. Census Bureau—the Business Dynamics Statistics—allow unprecedented tracking of business dynamics for U.S. firms and establishments. This is one of several BDS briefings to be released highlighting key features of this new data.

02/10/09The average share of employment accounted for by firms less than three years old varies widely by state, according to this analysis of U.S. Census Bureau data. The Business Dynamics Statistics (BDS), funded by the Ewing Marion Kauffman Foundation, found that young firms account for as much as 12 percent of employment in Southwestern and Western states. In states with a lower-ranking of the share of young firms, primarily those in the East and Midwest regions, only about 6 percent of employment is accounted for by young firms.

03/09/09Business startups that survive grow faster than more-established companies, according to Business Dynamics Statistics data funded by the Ewing Marion Kauffman Foundation. However, because entrepreneurial ventures also have higher mortality rates than older companies, they also have higher rates of job loss reflecting an “up or out” pattern.

03/15/09The Business Dynamics Statistics (BDS) includes measures of
establishment openings and closings, firm startups, job creation and
destruction by firm size, age, and industrial sector, and several other
statistics on business dynamics.